Debit and Credit of Statement of Financial Position Items

Objectives

• Build a simple double-entry bookkeeping system
• Apply debit–credit rules correctly
• Decide whether each account movement is a debit or a credit

Key Terms

• Double-Entry Bookkeeping – every transaction has a dual effect on Assets, Liabilities, or Owner' s\ Equity
• Account – running record of changes in a specific asset, liability, or equity item
• T-Account – visual ledger: left side = Debit, right side = Credit

T-Account Layout

ACCOUNT TITLE
Debit (Left) | Credit (Right)

Rules of Debit and Credit

• Asset: Debit ↑ | Credit ↓
• Liability: Debit ↓ | Credit ↑
• Owner’s Equity: Debit ↓ | Credit ↑

Steps to Record a Transaction

1. Identify the accounts affected
2. Classify each as Asset, Liability, or Owner’s Equity
3. Apply the debit–credit rules and post to T-accounts

Accounting Equation

Assets = Liabilities + Owner' s\ Equity
Transaction analysis symbols: + (increase) | - (decrease) | 0 (no effect)

Core Transaction Patterns

• Owner investment (P300{,}000): Debit Cash (Asset +) / Credit Capital (Equity +)
• Buy supplies for cash (P20{,}000): Debit Supplies (Asset +) / Credit Cash (Asset −)
• Collect receivable (P20{,}000): Debit Cash (Asset +) / Credit Accounts Receivable (Asset −)
• Pay payable (P20{,}000): Debit Accounts Payable (Liability −) / Credit Cash (Asset −)

Quick Recall Aids

• Normal debit balance: D E A L → Dividends, Expenses, Assets, Losses
• Normal credit balance: C L E R → Capital, Liabilities, Equity (revenues), Revenues
• Remember: "Left for DEAL, right for CLER"